Home buyer alert: leaving insuring your new home to the last minute can have consequences. Completing your real estate transaction may just depend on it.
Mortgage lenders can insist on insuring your new home to protect what could be the biggest investment in your portfolio. Don’t let the seller (and yourself) down by forgetting to apply for home insurance. You could just breach your contract to buy the property, and lose the whole deal.
An Axess Law licensed real estate lawyer (Toronto area or Ottawa) can advise you on insuring your new home, and getting a fire insurance binder. We help you close the deal so you can move into your new home as quickly as possible.
Just Another Day
Insuring your new home protects financial assets from unpredictable and worst-case scenarios. Severe wind, tornado warnings or electrical fires can all wreak havoc on well-laid plans for a comfortable lifestyle. What should have been just another day could turn out to be a costly misadventure.
File an insurance claim after a natural disaster.
Why Buy Insurance
Insuring your new home is cheap compared to rebuilding or repairing your home. Consider how much it would cost to:
- repair a fence damaged by construction next door
- replace electrical wiring ruined by a faulty heater
- redo siding after a vehicle collision
- fix shingles struck by falling objects from an aircraft (it happens)
- or install new wallboard after a kitchen fire.
Insurance coverage puts your mind at ease, and assures your lender the fair market value of your home won’t decline if the unexpected happens. The average Ontario homeowner pays around $117 a month or $1,409 a year for insurance. Insuring your new home is small change for a major investment. Insured perils in homeowner coverage.
3 Reasons You Need Homeowners Insurance Before Closing
1. You could be liable for fire or storm damages.
Sellers have been known to cancel their homeowners’ insurance before a buyer takes legal possession. That leaves your insurance agent and theirs in a legal quandary if a fire or storm damages the home in the meantime. Whose insurer is liable depends entirely on what happened, why, and when.
2. Timing is everything.
Insuring your new home may not be mandatory under real estate law in Ontario, but unless you buy your home or land for cash, potential lenders can demand proof of insurance. Failing to attend to this one detail between signing an agreement of purchase and sale and closing day could delay or frustrate your purchase.
Not only that, but vacant land you buy, with or without outbuildings, can create unknown liabilities. Vacant land insurance protects you if visitors, contractors or trespassers pursue you for damages from injuries they suffer on your property. All it takes is an abandoned well you didn’t know about it or rusty, barbed wire fence to make you liable
Can you insure a house before you move in? You can get an insurance certificate, or fire insurance binder to prove an insurer has committed to insuring your new home. Your new home won’t actually be insured until you take legal possession, which is when you assume title to the property. Fire and safety steps your condo corporation must take.
Prevent problems before they happen by asking your insurer to send a fire insurance binder to Axess Law before your closing date. We take care of discharging a mortgage in Ontario if you already have one — and finalize new mortgage arrangements with your lender. We meet your closing date on time and for less than you would normally pay.
3. Delays can cause contractual breaches.
How long before closing day you get homeowners’ insurance can make the difference between closing on time and potentially breaching your sales contract. Closing delays give a seller who has changed their mind the opportunity to walk away, leaving you potentially liable for the seller’s expenses and court-ordered damages.
Give yourself 20 to 30 days to compare insurance quotes and ensure your insurance certificate or binder is ready before closing day. Insuring a new home is cheaper because your home is in better condition — fixtures and finishes will last longer. Ontario Building Code changes have also made new homes less vulnerable to fire or extreme weather damage, lowering your insurance costs.
What to Insure
Mortgage lenders generally insist on standard insurance coverage for named perils like fire, lightning strikes, wind or water damage or explosions. Your fire insurance binder is a letter confirming insurance is in place before a real estate transaction completes.
Conditions Affecting Insurance
Your home’s age and condition affects insurance rates, so shop carefully. Getting a home inspection is advisable because flammable insulation, aluminum wiring or a wood-burning fireplace all increase fire risk. While you may not be turned down, it could take longer to find fire insurance.
Exclusions to Watch For
Read the fine print. Overland flooding coverage can be excluded in a floodplain and many policies leave out sewer backup or hail damage. Insurance riders give you that extra coverage for flood and water hazards. Uninsured perils you may not realize aren’t included in your policy (see page 12).
Are Insurance Riders Worth It?
Compared to comprehensive coverage for your home and contents or broad coverage that includes more frills, basic coverage does produce savings. But do you really want to leave out riders for expensive, hard-to-replace items like antique jewelery, cameras, glassware or a rare stamp collection that are irreplaceable to you?
Our tip: get only the coverage you need, but don’t overlook the basics.
Covering Personal Liabilities
Personal injury and civil lawsuits can take you by surprise. Relax! Home insurance may have you covered.
Your home can be protected from financial liens that affect your ability to sell or refinance if a courier, landscaper or neighbour gets hurt anywhere on your premises. You could be far away, on vacation or at work, and still be covered for legal or medical expenses.
Legal liabilities from civil lawsuits can also be captured under homeowners’ policies. Tell your insurer if you work from home or have business interests that could expose you to financial claims.
Questions to ask real estate lawyers.
Getting Condo Insurance
Condo owners beware.
Not only is condo insurance for damage or loss to belongings and your storage locker a wise investment, your liabilities if fire or a water leak damages adjoining units demand attention. It never hurts to have personal liability coverage, just in case a visitor slips on the tile floor.
Is condo living for you? Find out what it takes to live in a condo.
Common element fees can take a hit if the condominium corporation is negligent in maintaining icy sidewalks in winter. The condo building’s master insurance policy should cover that, but check before you buy.
You could be compensated for living expenses if you have to stay elsewhere temporarily because of damages to your building or unit. Ask your insurer to explain your coverages and exclusions.
Reducing Insurance Costs
Increasing deductibles, given the likelihood you’ll rarely file a claim, or installing security cameras and sprinklers can keep insurance costs in line. Look for discounts when you turn 55 or stop smoking and take advantage of deals for members of associations or college alumni. It could be worth your while.
Can You Make Conditional Offers?
Most offers to purchase are conditional and you can back out, although how your agreement is written could affect if you keep your deposit. You may be sued for damages if the home seller:
- accepts a lower offer after yours is withdrawn
- wrote an offer to buy a home and loses money
- or incurred costs like storing furniture, thinking the deal was done.
If you worry getting insurance could be an issue, make your agreement of purchase and sale contingent on the home inspection not affecting insurance availability. It might give you wiggle room when you need it.
Affordable Real Estate Lawyers, Anywhere You Are
Access lawyers for less in Greater Toronto Area, Ottawa, or by remote video conference. Our flat fee rates are affordable, and all inclusive (excluding taxes, disbursements, and third-party charges). Your final invoice includes no surprises, or hidden charges. Your itemized statement of adjustments is explained when we deliver it, and we answer any questions you have about it. You can get independent legal advice, or add a family member to a property for a modest title transfer lawyer fee. Axess Law offers you only the legal services you absolutely need.
Find a real estate lawyer in Ontario.
Mortgage Lawyers for Real Estate Closings
An Axess Law real estate lawyer in Ontario can close your home purchase online or in person. Meet with our lawyers remotely using secure video conferencing software, anywhere in Ontario, from the comfort of your home or office.
Use our easy online booking form to make appointments 7 days a week, day or evening. Or dial toll free to 1-877-522-9377 — 647-479-0118 in Greater Toronto Area — to book a meeting in person at Axess Law locations.